Nasdaq up 0.58% as Stock Market Ends Three-Day Downtrend
Amazon profits do not impress but several tech companies performed well this week to bring the indices out of a 3-day losing streak.
Quick overview
- After three days of losses, the stock market indices showed improvement on Friday, with the Nasdaq gaining 0.58%.
- Amazon's stock fell 4.4% following a disappointing earnings report that raised concerns about overspending on capital expenditures.
- Despite strong growth in cloud services, Amazon's financials did not alleviate investor fears regarding profit margins and AI-related spending.
- Roblox and Envista boosted the market with impressive earnings, highlighting that investors are focused on profitability beyond just revenue growth.
After three days of losses, the stock market indices showed signs of improvement on Friday, with the Nasdaq Composite index gaining 0.58%.
The Dow rose 0.25% and the S&P 500 added 0.41%, with tech stocks performing better on the Nasdaq for Friday morning after a tough earnings season. Alphabet (GOOG) stock fell in premarket trading by 0.68% despite strong cloud storage growth. Amazon (AMZN) was down 4.4% on Friday after releasing earnings for the previous quarter and worrying investors with steep capital expenditures.
Amazon reported revenue of $35.6 billion on their Amazon Web Services, which converts to growth of 24% year over year. That was not enough to calm the fears of investors who noticed that the company was increasing their capex spending to $200 billion for 2026.
Market Volatility Decreases
As premarket trading began on Friday, the stock market ended a three-day losing session with its first positive start across the board. All three indices were up on Friday and may continue to climb despite a poor showing from Amazon and a few other tech giants who failed to impress their shareholders over the last two weeks.
At its lowest, Amazon stock fell 11% after their earnings report released. It is obvious that their data did not assuage market-wide fears over AI overspending by tech companies, and investors should pay careful attention to the trend of stock price decline after earnings reports for companies that invest heavily into artificial intelligence. Even with tremendous growth in the cloud and web services divisions, Amazon was not able to placate shareholders about their profit margins.
However, AI-related tech companies did not carry the market on Friday. Rather, an excellent showing from Roblox Corp (RBLX) and Envista (NVST), gaining 12% and 13% respectively, lifted the market as both companies shared Q4 earnings that exceeded expectations. Roblox managed to ease parents’ concerns over child safety, and Envista impressed with 100% free cash conversion.
Tech companies should realize that shareholders and investors are worried about more than simply revenue or earnings per share. They want to see the issues addressed that have been bothering them, particularly profits for those companies that have been spending millions or even billions on tech investments. While the stock market may continue to climb for Friday, profitability concerns from Magnificent Seven stocks like Microsoft, Amazon, and Alphabet are holding back the Nasdaq and S&P from all-time highs.
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